We're becoming smarter – and tighter – with credit cards

You hear plenty about Australians' evil debt mountain, but there are signs that we're collectively smarter users of credit than we tend to, um, give ourselves credit for.

For a start, we're waking up to the folly of paying outrageously high credit card interest rates and have been cutting back on consumer debt in general. We've been using our headline-grabbing household debt to buy appreciating assets, rather than splurge on depreciating consumer items.

In round numbers, we were paying interest on $37 billion of credit card debt in 2012. We now have it down below $33 billion. That's a bigger achievement when keeping in mind that over that time frame, our population has risen from 22.7 million to 24.5 million.

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We are becoming savvier with how we manage debt.Credit:FDC

The average credit card balance accruing interest was nudging up towards $2500 five years ago. Now it's below $2000. Well done us.

The credit card story is part of a general decline in non-real-estate personal borrowing. The Australian Bureau of Statistics' May lending finance reports $5.82 billion of personal finance loans taken out – the lowest level in 15 years.

Wargent highlights that, for all the talk of mortgage stress, mortgage defaults are low outside some hotspots in WA and regional Queensland. And while the watchdogs are concentrating on tightening up on investor loans, investors have a lower default rate than owner-occupiers.

What's also often missed by the local doomsday merchants is our love of offset accounts. (They're not alone – my personal experience of applying for a Qantas Money credit card found a Citi operative in some foreign call centre unable to grasp the idea of a 100 per cent offset account.)

Declining credit card debt.

Our net debt, once deposits are taken into account, isn't quite as scary.

The most important factor in servicing debt is employment, followed by interest rates. Monthly labour force statistics jump around, but last week's figures show a trend of quite decent employment growth that means mortgage payments are made.

Better money management.

As for interest rates, despite some hysterical reactions to the last Reserve Bank board minutes, the current 1.5 per cent cash rate isn't heading up to the RBA's theoretical "neutral" rate of 3.5 per cent any time soon.

What's more, if people haven't been lying on their mortgage applications and if lenders have been doing what APRA tells them to, mortgages have only been granted on the ability to service rates a few hundred points higher.

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Show me diving employment levels and then I'll pay more attention to housing crash stories. In the meantime, the growth in debt has been to buy real estate and financial assets, assets that have grown faster than our debt.

But this view of Australians getting better at handling debt doesn't fit with the preferred story of disaster and penury. It's in our nature, part of behavioural finance, that we want to read "disaster looms" stories more than "it looks like we're doing OK".